March quarter funding in Indian start-ups drops 75% year-on-year as ‘winter’ intensifies
Capital worth $2.8 billion flowed into Indian startups in Q1 2023, compared to $11.9 billion in the year-ago period. Late-stage deals were the worst impacted by the funding slowdown.
- Apr 7, 2023,
- Updated Apr 7, 2023 2:27 PM IST
The funding winter is fairly pronounced in India now, with investments in start-ups in Q1 2023 (March quarter) declining 75 per cent over Q1 2022. The number of funding rounds too decreased by 63 per cent from 816 in Q1 2022 to 301 in Q1 2023, according to private markets database Tracxn.
Late-stage funding (Series C and beyond) was the worst hit, recording a 79 per cent drop between Q1 2022 and Q1 2023. Even on a quarter-on-quarter basis, investments in late-stage start-ups dipped 23 per cent over the December quarter. Early-stage rounds, meanwhile, saw a marginal drop of 4 per cent compared to Q4 2022, but a significant 68 per cent year-on-year decline over Q1 2022.
“In terms of quarterly funding, India was the second-highest funded geography in Q1 and Q2 2022. It fell to fourth place in Q3 and Q4 2022. Rising inflation and interest rates have impacted investments significantly. Companies are now resorting to layoffs to preserve cash,” Tracxn explained.
In the just-concluded quarter, capital worth $2.8 billion flowed into Indian startups, compared to $11.9 billion in the year-ago period. Fintech, retail, and enterprise tech (SaaS) emerged as the top-performing sectors. Even though fintech funding went up by 150 per cent since last quarter, the sector witnessed a YoY funding drop of 51 per cent over Q1 2022.
There were nine large 100 million+ funding rounds during the quarter in startups, including PhonePe, Lenskart, Mintify, Insurance Dekho, FreshtoHome, TI Clean Mobility and KreditBee. Accel, Sequoia Capital, and Alteria Capital were the top early-stage investors in Q1 2023, while Premji Invest, Elevation Capital, and Chiratae Ventures led late-stage deals.
However, no new unicorns were created in Q1 2023, compared to the 14 that were birthed in the year-ago period. India, in fact, has not seen a new unicorn over the last two quarters.
In a recent interview with Business Today, Amit Chandra, Partner and Chairman of Bain Capital India, said, “The funding winter will get worse before it gets better.”
“Almost 90 per cent of India’s start-up funding comes from overseas venture capital. This is completely unsustainable. India needs to diversify its funding base and build a lot more local funding for startup innovation in the country,” he added.
The funding winter is fairly pronounced in India now, with investments in start-ups in Q1 2023 (March quarter) declining 75 per cent over Q1 2022. The number of funding rounds too decreased by 63 per cent from 816 in Q1 2022 to 301 in Q1 2023, according to private markets database Tracxn.
Late-stage funding (Series C and beyond) was the worst hit, recording a 79 per cent drop between Q1 2022 and Q1 2023. Even on a quarter-on-quarter basis, investments in late-stage start-ups dipped 23 per cent over the December quarter. Early-stage rounds, meanwhile, saw a marginal drop of 4 per cent compared to Q4 2022, but a significant 68 per cent year-on-year decline over Q1 2022.
“In terms of quarterly funding, India was the second-highest funded geography in Q1 and Q2 2022. It fell to fourth place in Q3 and Q4 2022. Rising inflation and interest rates have impacted investments significantly. Companies are now resorting to layoffs to preserve cash,” Tracxn explained.
In the just-concluded quarter, capital worth $2.8 billion flowed into Indian startups, compared to $11.9 billion in the year-ago period. Fintech, retail, and enterprise tech (SaaS) emerged as the top-performing sectors. Even though fintech funding went up by 150 per cent since last quarter, the sector witnessed a YoY funding drop of 51 per cent over Q1 2022.
There were nine large 100 million+ funding rounds during the quarter in startups, including PhonePe, Lenskart, Mintify, Insurance Dekho, FreshtoHome, TI Clean Mobility and KreditBee. Accel, Sequoia Capital, and Alteria Capital were the top early-stage investors in Q1 2023, while Premji Invest, Elevation Capital, and Chiratae Ventures led late-stage deals.
However, no new unicorns were created in Q1 2023, compared to the 14 that were birthed in the year-ago period. India, in fact, has not seen a new unicorn over the last two quarters.
In a recent interview with Business Today, Amit Chandra, Partner and Chairman of Bain Capital India, said, “The funding winter will get worse before it gets better.”
“Almost 90 per cent of India’s start-up funding comes from overseas venture capital. This is completely unsustainable. India needs to diversify its funding base and build a lot more local funding for startup innovation in the country,” he added.